While First Foundation has traditionally focused on arranging residential mortgages for Canadians, we can arrange commercial mortgages for small business owners as well.
Depending on your situation, First Foundation can arrange financing for up to 85% of the commercial property value. Small commercial mortgages can be fixed rate or variable rate, as well as open or closed terms.
Commercial lenders will qualify applicants based on a combination of the following:
- Property Type
- The Debt Service Coverage Ratio (DSCR) or cash flow. *Usually lenders look for a DSCR of 1.25% compared to costs (mortgage payment, taxes, condo fees, utilities, etc.
- Down payment / equity
- Environmental reports on the property
- Appraisals are required for commercial mortgages. It generally takes three to four weeks from the date ordered to receive a commercial appraisal report, and the appraisal itself costs between $1,500 and $3,000.
- Interest rates vary depending on what your credit score is, so the higher your score the better (click here for more information on credit and credit scores).
A commercial mortgage is not a business loan. It is a secured loan against a hard asset (real estate). It is not an operating line or a leasing arrangement, so it may not be suitable in all cases.
Give yourself more time to complete a commercial mortgage transaction than you normally would a residential mortgage.
Budget for higher closing costs (appraisal, legal fees, lender/broker fees, etc). Three percent of the loan amount should suffice.
For commercial mortgages, it's your company that purchases the property. In most cases the shareholders of the company purchasing the property will need to provide a personal guarantee.
If you are purchasing or thinking of purchasing an apartment building, storefront, retail property, industrial property, an office space, or another type of commercial property, and are interested in discovering what First Foundation can do for you, please contact us.